The following is an excerpt from my book, New Jersey Elder Law: A Resource and Planning Guide. The book is published by ALM Media. ALM is the publisher of the New Jersey Law Journal¸ the leading New Jersey legal periodical. If I do say so myself, the book contains a great deal of information for those individuals who are generally interested in the articles that I write in this paper.
If you are interested in obtaining my book, you can contact the New Jersey Law Journal at 973-642-0075 or contact Doug Brown at dabrown@alm.com.
9-6 Transfer of the Home
The single most important asset to a client is his home. Most of the individuals who come to see an elder law attorney for purposes of Medicaid planning are interested in protecting their home. In a pre-planning mode, that is, a plan where the client will transfer the home and wait five years before applying for Medicaid benefits, there are a number of ways in which the transfer of the home can be accomplished.
9-6:1 Life Estate
Having a client transfer his home to his children and retain a life estate in the home is one of the oldest and simplest ways in which to protect the home in a pre-planning mode. The client has a deed drafted for him through which he transfers the home from himself as fee simple owner to himself as life tenant with his children as remaindermen.
When a Medicaid applicant owns real property with another individual and that other individual refuses to sell the property, the county board will treat the property as unavailable. Technically, a life tenant could sell his interest in the property (the life estate) without the consent of the remainderman, but there is no readily available market for the sale of a life estate. Accordingly, only if the remainderman will consent to the sale of his interest in the property (the remainder interest), too, would the property be marketable. So—from a practical standpoint, if not a legal standpoint—the property is unavailable when all the Medicaid applicant owns is a life estate and the remainderman refuses to sell.
Furthermore, upon the applicant’s death, DMAHS will not seek estate recovery against the property. The New Jersey regulations governing estate recovery do not permit recovery against a life estate created during the applicant’s life.
Given the foregoing, if the client transfers his home subject to a retained life estate then waits 61 months before applying for Medicaid benefits, the home will no longer count against him for purposes of determining his eligibility for Medicaid benefits, and DMAHS will not seek estate recovery against the home after his death for any Medicaid benefits that may have been paid.
9-6:2 Life Tenancy
The difference between a true life estate and a life tenancy is that with a life tenancy, the client is simply retaining the right to use and occupy the home during his life. He is not retaining the right to the proceeds of sale if the home is sold during his life.
The advantage of a life tenancy over a life estate is that if the home is sold during the client’s life, then the client is not entitled to any of the proceeds of sale. Because the remaindermen are often interested in selling the home once the client begins to reside in a nursing home, retaining less than a full life estate for the client can be beneficial.
If you or someone you love is interested in the Medicaid program or the administration of a deceased individual’s estate or in drafting a proper Will, power of attorney, or living will, then my book is a must read for you. These areas of the law are fraught with pitfalls. In my book, I provide you with an understanding of these areas of the laws and helpful tips for navigating your way through the legal issues affecting the elderly and disabled.